It Takes $450,000 to Be Middle Class in the Bay Area

The other day I was having a debate with one of my blog readers about the definition of Middle Class. We were both trying to sort out what the income requirement was to be “middle class” in the Bay Area or any region of the country. I came up with a pretty simple equation…

Middle Class, to me, equals being able to afford a modest house for a family (3br, 2ba) in a reasonably good neighborhood within one hour of where you work (i.e. a suburb of a major city.) Based on various estimates you should spend about 25% of your AFTER TAX income on your monthly home payment. Thus, in order to determine what it takes to be middle class in any region, we can look at what homes cost in that region, and base our definition on that.

[edited to add — there are SOME homes for the $800k-$1M range in the east bay in reasonable neighborhoods. Thus, you can say that it takes more like $350k to be middle class, but it’s still higher than NYC.]

This may sound high – $450k to be middle class means that both members of the couple must earn $225k, or one must earn $300k and the other $150k , or any other combination to get you to $450k. You can make the case that there are some homes available for a little less than $1.5M, so perhaps you can get away with making $400k joint to be middle class – but that is the bare minimum. Lower middle class = renting a house or owning a condo, or owning a home in a more crime-ridden part of town.

Let’s compare the Bay Area to the Tri-State Area, where a similar home would go for $500k-$800k in New Jersey or Westchester, requiring a mortgage of $3000 a month for a very nice home. This then requires an after-tax income of $12k-$15k, or an annual joint income of about $250k. Thus, $250k in NY is middle class. In the Bay Area, you need to make almost DOUBLE that to be middle class. It’s practically impossible to be middle class in the Bay Area unless you have two executives or engineers in your household.

Here are a few other regions. Try it yourself for where you live and comment below to share what a middle class income would be in your region:

I disagree. Middle Class = the amount required to own a basic home in a middle class neighborhood, purchase a slightly used or new basic car (toyota/honda), and live a middle class lifestyle. The income required to live a middle class lifestyle in the Bay Area is higher than it is in Kansas. That’s a fact. That’s not to say that one can’t move to Kansas and become middle class making less money than they do now — it’s just that in order to be middle class here, you need two people working tech / high paid jobs making $200k+ each. Is there some place in the Bay Area people live if they’re making $50k-$60k? Of course. They’re living in a 1br rental in a bad neighborhood split with roommates. That’s not a middle class lifestyle. Or, they have a 3 hour commute to work each way. Maybe then they have a middle class lifestyle, but the 3 hour commute defeats it.

I think there are probably a lot of households making around $400K in the Bay Area. Two software developers could easily make that. Others either bought early, benefitted from stock options, or had help from parents. So I am not surprised at that figure.

There are a lot making $400k in the Bay Area. I am 34, and making $200k+ with bonus and RSU. But my husband is going to be a teacher and make $50k. I married someone working in tech, I could be one of those couples making $400k and squarely middle/upper middle class here. But, we jointly make $250k, which means we can afford to live here, but not to own.

Exactly. There are a lot of households making this much. I make nearly $200k as a business-side senior level director so if my husband had a similar income we’d be approaching middle class – by the time we were in our mid 30s we’d be there. But he makes $50k and I make just shy of $200 so we’re at $250k which is lower middle here. Either you need one very rich partner (i.e. VP making $400k-500k married to low income spouse) or two incomes of $200k+ each to really afford to live here. And there are def a lot of couples who make that. But the sad thing is bringing in $400k-$500k a year isn’t even RICH which is crazy talk.

My point is that I’m looking at within 1 hour of an urban area. In NYC you can live 1 hour from the city, earn an urban income and own a nice home in a nice neighborhood for $400k. In the Bay Area, this is impossible. You would need to spend at least $800k for the same home. Yet incomes are the same. It’s important to realize that NYC has affordable suburbs, the Bay Area does not.

Going by your calculations, and what I think an average suburban house near me costs ($200k), I get something like $65,000 for middle class, which is indeed about the median income in the Albany area. There’s just something about your housing prices out there that they’ve gone completely bonkers.

Thank you for sharing. I’ve realized that there are a few places here where middle class can be $350k, but still – it’s a lot more than Albany. It’s good to hear that my calculations make sense for a part of the country I didn’t look at. Most of the country you can afford a house at medium income. Not in urban areas and esp not in the Bay Area. The reality is that a lot of people here have dual “high income” households. I make $190k so I *could* be married to someone who makes that or more (lots of women marry slightly older men, so that would leave you with about a $190k+$250k income, getting you to about the $450k needed.) But, since MR. HECC is a teacher, we’re at $250k and “lower middle class” here.

You have a point – but isn’t “middle class” supposed to be able to afford a house with a “white picket fence?” That’s the american dream. In rural Iowa you can make a lot less money to be middle class. In urban / suburban areas you have to be in the 5% to be middle class. It evens out across the country though.

I think of middle class as roughly in the 25-75% for income and wealth, controlled for locale. So perhaps a marker for the middle class in rural Iowa is a house with a decent amount of land, but in really tight urban areas like SF or NYC, the middle class may largely rent or be condo dwellers.

Now we can argue whether or not we should make it possible for everyone that is middle class in a city to become a homeowner, or perhaps lament that it is so hard for the middle class of these urban areas to purchase real estate (btw given the density of these areas the standard will probably have to be condos rather than sfh’s), but I consider that a different discussion.

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The anti-minimalist: I'm the absolute worst with money. I have a shopping addiction. That's exactly why this blog exists. HECC is not a typical personal finance blog. I started it in 2007 to hold myself accountable for binge spending, a dropping networth, and lack of overall fiscal literacy. 10 years later, had achieved a networth of over $500k. Now my goal is to hit $1M by 40. Recently married and with my first kid on the way, things are about to get... interesting. I write about the intersection of mental health and money, spending & investing, and millennial personal finance.